Floor Covering Weekly September 30, 2013 : Page 1

FCW Vol. 62 No. 18 A Hearst Business Publication September 30, 2013 $4 A Hearst Business Publication C ommercial Supplement to Floor Covering Weekly September 2013 F LOOR C OVERING W EEKLY The Industry’s Business News & Information Resource Continuum: Mohawk’s PET ‘game changer’ [Dalton, Ga.] Mohawk is investing $180 million in a proprietary PET process, Con-tinuum, that it expects will change the game when it comes to selling polyester carpet — a business that today commands a 35 percent share of the total residential carpet market.. “Polyester is growing but it is a category that lacks differentiation,” said Brian Carson, president of Mohawk flooring. “Our chal-lenge was, how can we create a better poly-ester fiber that creates value for our partners and still remain cost competitive?” Mohawk’s answer is a patent-pending, proprietary process that results in a strong, cleaner, environmentally friendly polyester. The addition of Scotchgard not only enhances the products’ already superior performance, but also should help increase dealer sales and consumer satisfaction, according to Mohawk. The development of Continuum was guided by the company’s “three I” principle — Invest-ment, Innovation and Impact. Continuum, reported Mohawk, “Starts Clean. Stays Clean.” Explained Tom Lape, Mohawk’s president of market development, “Innovation is a Mohawk cornerstone. We are good at innovation such as the development of SmartStrand with DuPont Sorona, featuring a bio-based component and softness.” SmartStrand has fueled carpet sales and a flood of other soft fiber carpets. The hefty investment in the Continuum process represents brick and mortar expan-sions as well as equipment and will have created 500 new jobs when totally complete. Mohawk’s Continuum operation in Sum-merville, Ga., is already producing cleaner PET chip from Mohawk’s bottle recycling Mills spend big to grow business Star Floors in Dallas installed FLOR carpet tile in bright colors and bold patterns at Todd Events corporate o ces in Dallas to underscore the kind of original, creative planning the company provides. Continental focuses on full service Tile meets install demands Shaw adds warmth to sterile spaces Laticrete ‘LEEDS’ airport project fcw93013-Commercial.indd 15 9/25/13 4:05 PM Major investments indicate industry comeback By Janet Herlihy The surest sign of industry recovery might just be here in the Carpet Capital of the World, Dalton, Ga. Unemploy-ment numbers throughout Northwest Georgia are plummeting as carpet mills are investing hundreds of millions of dollars in new plants, equipment, fiber systems, R&D and more. This year alone, unemployment in Northwest Georgia dropped to 9.4 per-Checking out plans for the new plant: Steve Kiker cent at the end of July 2013, down from and John Kiker, Kiker Construction; Dewayne West-10.1 percent just a few months earlier in moreland and Danny Freeman of Engineered Floors. May. At the peak of unemployment, it was up to 13.5 percent in November 2011. was being shutdown in favor of BCF and now, But in the last several months, the indus-with the ramp up of housing and construction, try’s largest carpet mills have begun to invest more fiber and yarn production is needed — and heavily — in manufacturing and the and is being created with new investments. staffing to support it. And, just this week, Second, as the carpet business strengthens, so Shaw announced an additional $40 million do the local suppliers to the industry.” investment in its Epic hardwood plant. While unemployment rates in Northwest “In the carpet industry, there continues Georgia are still higher than Georgia overall to be aggressive investment in fiber and yarn or the U.S., Anderson noted, “There are about production for BCF (bulked continuous fila-2,500 jobs in the pipeline here and we should ment),” said Brian Anderson, president of the see employment improve in the next year.” Greater Dalton Chamber of Commerce. “Even In 2013, carpet and rug production peaked before the downturn, staple yarn production Continued on page 14 Photo Credit: Matt Hamilton/the Daily Citizen Continuum ‘Starts Clean. Stays Clean.” Continued on page 14 FCW Exclusive Mohawk’s 3 pillars: Innovation. Investment. Impact. Innovation “Mohawk has a long history of innovation in polyester that goes back over 20 years when we began to recycle bottles into polyester staple,” said Brian Carson, president, Mohawk Flooring. “Now, the market has moved to filament yarns but that 20 years of experience has given us the know-how and the capability to create a better, stronger polyester fiber than before.” He explained that the company’s new Continu-um process goes all the way back to the raw ma-terials — using the highest grade PET available for carpet which comes from recycled bottles. Then through various purification processes, Mohawk is able to create a better quality fiber for superior performance. The next step is to thor-oughly scour the fiber to remove up to 95 percent of the oils left over from pro-Brian Carson cessing. That delivers not only a cleaner carpet but one that is less likely to attract dirt that can lead to premature soiling. “Through Continuum,” said Carson, “we have Continued on page 14 Nation’s finest report industry optimism NFA sets sights on future growth By Amy Joyce Rush [Boston] Some of the nation’s most profit-able flooring retailers, all National Floorcover-ing Alliance (NFA) members, met here earlier this month for their semi-annual conference to work with key vendors and each other. While vendors reported business with this group is up, the dealers themselves said sales have been up for the year — most up double digit percentages — though they hesitate to declare the industry on solid ground. Phil Koufidakis of Baker Bros. and NFA president said his own business is good. But, he cautioned, “Based on what we have all P e r i o d i c a l Past NFA president Jeff Macco of Macco’s with current NFA president Phil Koufidakis of Baker Bros. and Jay McDonnell Custom Carpet been through, I would never use the word firmly. I think we are on better footing right now and barring major negative events, this For breaking news updated each business day, visit us online at www.fcw1.com Continued on page 4

Continuum: Mohawk’s PET ‘game changer’

Mohawk is investing $180 million in a proprietary PET process, Continuum, that it expects will change the game when it comes to selling polyester carpet — a business that today commands a 35 percent share of the total residential carpet market..

“Polyester is growing but it is a category that lacks differentiation,” said Brian Carson, president of Mohawk flooring. “Our challenge was, how can we create a better polyester fiber that creates value for our partners and still remain cost competitive?”

Mohawk’s answer is a patent-pending, proprietary process that results in a strong, cleaner, environmentally friendly polyester. The addition of Scotchgard not only enhances the products’ already superior performance, but also should help increase dealer sales and consumer satisfaction, according to Mohawk.

Explained Tom Lape, Mohawk’s president of market development, “Innovation is a Mohawk cornerstone. We are good at innovation such as the development of SmartStrand with DuPont Sorona, featuring a bio-based component and softness.” SmartStrand has fueled carpet sales and a flood of other soft fiber carpets.

The hefty investment in the Continuum process represents brick and mortar expansions as well as equipment and will have created 500 new jobs when totally complete. Mohawk’s Continuum operation in Summerville, Ga., is already producing cleaner PET chip from Mohawk’s bottle recycling operation, extruding better PET filament and tufting the best PET carpet in the industry, according to Lape. The new operation is expected to be complete by May 2014, but the first Continuum products will be in dealers’ showrooms in the fourth quarter this year.

Giving polyester a story to sell by PET already represents $1.5 billion, or approximately 35 percent of the $4.5 billion residential carpet market, according to Lape, but so far, it is seen as an entrylevel product.

What it needed, according to Lape, was something that RSA’s can talk about that would connect with consumers and ultimately help sell the product as more than a low-end solution. “It is a simple approach that connects with the consumer and RSAs can sell,” said Lape.

“We are making Mohawk PET better and that gives the retailer a way to differentiate Continuum products in ways that resonate with the consumer,” Lape continued. “We looked at the most important considerations consumers have when buying carpet.” Durability was a concern for 72 percent of respondents; price for 64 percent; and, cleanability for 69 percent of respondents.

“Retailers can feel confident they are selling a cleaner, greener, better performing PET carpet resulting in satisfied customers and profitable retail convergence,” Lape added. “We see PET as an opportunity to innovate in the value category.”

The price of Continuum PET products will maintain a competitive position in the market. Lape noted, “Continuum Process creates value added attributes for a better PET carpet.” Mohawk will be providing POP materials to help dealers and retail sales associates (RSAs) explain the advantages of Continuum carpet.

Continuum’s story is about a cleaner process, cleaner product and cleaner planet.

Cleaner Process: Starting with high-grade raw materials, Mohawk uses only superior, FDA-approved PET bottle resin, the highest- grade polymer available for the production of PET bulked continuous filament (BCF) carpets. “The polymer we use has a higher molecular weight, which provides a better building block in our PET fiber production process that ultimately leads to a better carpet,” said Lape.

Cleaner Planet: Continuum carpet also contributes to a more sustainable world by using up to 50 percent recycled content in the PET yarn. Mohawk diverts more than three billion bottles from landfills in its recycling operation and utilizes up to 70 percent less energy to produce than virgin polyester.

Mills spend big to grow business

Janet Herlihy

Major investments indicate industry comeback

The surest sign of industry recovery might just be here in the Carpet Capital of the World, Dalton, Ga. Unemployment numbers throughout Northwest Georgia are plummeting as carpet mills are investing hundreds of millions of dollars in new plants, equipment, fiber systems, R&D and more.

This year alone, unemployment in Northwest Georgia dropped to 9.4 percent at the end of July 2013, down from 10.1 percent just a few months earlier in May. At the peak of unemployment, it was up to 13.5 percent in November 2011.

But in the last several months, the industry’s largest carpet mills have begun to invest — and heavily — in manufacturing and the staffing to support it. And, just this week, Shaw announced an additional $40 million investment in its Epic hardwood plant.

“In the carpet industry, there continues to be aggressive investment in fiber and yarn production for BCF (bulked continuous filament),” said Brian Anderson, president of the Greater Dalton Chamber of Commerce. “Even before the downturn, staple yarn production was being shutdown in favor of BCF and now, with the ramp up of housing and construction, more fiber and yarn production is needed and is being created with new investments. Second, as the carpet business strengthens, so do the local suppliers to the industry.”

While unemployment rates in Northwest Georgia are still higher than Georgia overall or the U.S., Anderson noted, “There are about 2,500 jobs in the pipeline here and we should see employment improve in the next year.”

In 2013, carpet and rug production peaked in May and June with a 3.9 percent increase for those months, according to the Federal Reserve Board’s Industrial Production Index. Gains in the carpet and rug industry then slowed, producing a 3 percent increase in July and only 2.1 percent growth in August, according to Stuart Hirschhorn, director of research, Catalina Research.

Here is a look at the investments being made:

Randy Merritt, Shaw president, reported, “Building on the recovery and stabilization that we saw over the past few years, 2013 has been a year of positive growth. Our investments in the business remain strong and employment is improving.”

Currently, Shaw employs a total of 23,000, of which about 15,000 are based in Georgia. By the middle of September 2013, 1,170 new associates had joined Shaw this year.

The company is investing $100 million in its distribution network and to expand its fiber extrusion facility in Northwest Georgia. The investments will add about 175 jobs total. The distribution changes are expected to be complete by the end of 2015, while the extrusion expansion will begin next month, in October.

Shaw also recently announced plans to invest $85 million in a new facility in Bartow County for the manufacturing of modular carpet. Construction is expected to start on the Adairsville plant in 2014 and will take between 18 and 24 months to complete and will create about 500 new jobs.

Mohawk has announced its Continuum Process for PET investing $180 million and creating 500 new jobs. Continuum involves bricks and mortar expansion, as well as patent-pending technologies for fiber extrusion and yarn processing. (See page one for complete story.)

Engineered Floors LLC hasn’t stopped building to produce its PureColor solution dyed polyester (PET) fiber and carpet since Chairman and CEO, Bob Shaw founded the company in 2009. It has expanded its existing Calhoun and Dalton plants four times each. It will complete the current expansion in Dalton before the end of the year, according to Shaw. When the Dalton plant is complete, it will employ about 860 people. The company recently broke ground on Plant #3 in Whitfield County.

The new facility will be built in four phases. The first phase will open next late second quarter 2014. When it is completed by mid-2016, it will have fiber production, tufting, finishing and distribution and employ about 1,000 workers.

Beaulieu America recently expanded its yarn processing plant capacities which required the need for approximately 200 new team members, according to Mike McAllister, vice president of marketing for the company.

Seeking to fill those positions, Beaulieu teamed up with Chattanooga State University to arrange a job fair to screen potential new team members from the Chattanooga area and take applications.

The Dixie Group has added capacity and brought back employees in its Northwest Georgia facilities. “We have hired about 260 workers for our Georgia operations,” said Kennedy Frierson, COO of Dixie. “We brought on new capacity in the yarn area at the end of 2012 and early 2013 and needed more people,” Frierson said. “We also purchased new tufting equipment for Eton and are continuing to make investments in dyeing in Calhoun as well as more tufting. We added a second shift for cut order processing. We anticipate that we will grow another 10 percent next year and there would be incremental gains in employment then as well.”

Mohawk’s 3 pillars: Innovation. Investment. Impact.

Innovation
“Mohawk has a long history of innovation in polyester that goes back over 20 years when we began to recycle bottles into polyester staple,” said Brian Carson, president, Mohawk Flooring. “Now, the market has moved to filament yarns but that 20 years of experience has given us the know-how and the capability to create a better, stronger polyester fiber than before.”

He explained that the company’s new Continuum process goes all the way back to the raw materials — using the highest grade PET available for carpet which comes from recycled bottles. Then through various purification processes, Mohawk is able to create a better quality fiber for superior performance.

The next step is to thoroughly scour the fiber to remove up to 95 percent of the oils left over from processing. That delivers not only a cleaner carpet but one that is less likely to attract dirt that can lead to premature soiling.

“Through Continuum,” said Carson, “we have a strong filament that we are able to clean in an enhanced way that gives us a better polyester carpet.” Then on top of that, Mohawk applies Scotchgard Protector Advanced Repel Technology. “We are the only mill to use Scotchgard on polyester filament carpet,” he said.

Still, Mohawk is pricing the line to be “fully competitive” against existing polyester goods.

“They all have their place in the market,” he said. “Poly has good stain resistance at a good value but remains very undifferentiated. There is an opportunity for innovation in all categories and Mohawk has been a leader in innovation in all fiber systems.

“We think the market wants and we think the market needs and we think the market is ready for differentiation in the polyester category,” he said. “Any consumer would prefer to have a cleaner product choice. They will take that every time. We think that is a great value.”

Investment
Mohawk is investing $180 million in plant and equipment upgrades in its Summerville, Ga., facility that will be completed in May 2014 to produce a superior PET fiber with lower environmental impact and which will create some 500 new jobs.

Impact
The new Continuum Process is a cleaner process that results in a cleaner product and increases the use of recycled materials while producing a superior PET fiber. The goal is a differentiated product that increases retail sales as well as enhanced customer satisfaction.

Nation’s finest report industry optimism

Amy Joyce Rush

NFA sets sights on future growth

Some of the nation’s most profitable flooring retailers, all National Floor covering Alliance (NFA) members, met here earlier this month for their semi-annual conference to work with key vendors and each other.

While vendors reported business with this group is up, the dealers themselves said sales have been up for the year — most up double digit percentages — though they hesitate to declare the industry on solid ground.

Phil Koufidakis of Baker Bros. and NFA president said his own business is good. But, he cautioned, “Based on what we have all been through, I would never use the word firmly. I think we are on better footing right now and barring major negative events, this should continue. With that said, as we all know, there are major national and international issues that can tip that at any moment.”

David Snedeker at Nebraska Furniture Mart (NFM) echoed this outlook. “We are up around 15 percent for the year, which has been very consistent most of the year. We are cautiously optimistic that things are moving in the right direction.”

Roberts Carpet’s Sam Roberts said this year was “reasonably good,” adding, “We are about 15 percent ahead of last year and will undoubtedly finish the year somewhere in that vicinity. I am cautiously optimistic. I think that the recovery remains fragile — especially at retail.”

But post-recession growth is not without its challenges. Steve Boardman at MMM Carpets told Floor Covering Weekly in Boston that they have all seen an uptick but that there are still hurdles ahead. “I believe the biggest challenge we will face is staffing both in sales and installations. As we move forward to a robust economy, human resources will be something all of us will have to face and deal with including health care.” Boardman said MMM Carpets is up about 30 percent.

Individually, each of the NFA members has market dominance. As a group, the strength lies in the openness to share strategies and best practices with each other freely. For many, that is the main reason to come together.

“I do not think you will find a more sharing bunch of entrepreneurs anywhere,” noted Koufidakis.

Roberts added that the requirements to join and stay an NFA member keep the group operating together at a high level. “The NFA strongly considers other aspects like character and intellectual capital that will be brought to the group. The group has little interest in growing the number of members. A new member would probably need to raise the average in at least one important aspect to be considered for membership. I think every member within the group feels very fortunate to be a part of the NFA.”

Indeed, NFM’s Snedeker said that it is the collaboration among its members that sets the group apart. “We share best practices and learn from each other. These are some of the best and most creative minds in our industry and they willingly share with each other.”

Carpet, a category that has lost market share to hard surface in the last few years, was one area that dealers here said created excitement, even for those who aren’t easily impressed.

“It’s really not all that easy to get me excited,” said Roberts in response to FCW’s question pertaining to a product or program that stood out. But, he continued, “I saw some beautiful new carpet product and all of the carpet vendors seem to be energized and focused. The passing of the baton at Royalty/Camelot has brought new energy and creativity to that solid, mostly better goods, manufacturer.”

NFM’s Snedeker added, “The most exciting thing I saw was people bringing out new Stainmaster carpet samples. Beautiful new products. Lots of energy in everyone’s new offerings.”